Bretton Woods System’s Lasting Impact
Anyi Li
After WWII, leaders from forty-four nations met in New Hampshire, U.S.. This conference is known as the Bretton Woods Conference. At the conference, world leaders decided to tie the world currency exchange to the U.S. gold dollar to stabilize the international monetary order so that they can prevent another catastrophic war. At the time, the gold standard worked because the U.S. held three-fourths of the world's gold. It also came off WWII relatively unscratched and experienced a dramatic economic boom, while the rest of the world's infrastructure and cities were devastated and their national economy broke. When the 1970s rolled around, the American government had to fund a costly Vietnam War by printing more money. The American gold reserve could no longer support its increasing money supply. As a result, American President Richard Nixon relinquished the gold standard completely. Though the U.S. breakoff canceled this part of the original Bretton Woods agreement, the U.S. dollar is still largely the world's currency even today, as part of Bretton Woods' legacy.
Americans who grew up using American dollars may not understand what this means. As a Chinese international student, I experience firsthand the Bretton Woods legacy of U.S. dollar dominance in the world monetary order. Through globalization, my family's affordability of my American education often depends on the American government's monetary or trade policies, even though my family lives an ocean apart from the U.S.. Before the Great Recession of 2007-2009, the exchange rate between the U.S. dollar and Chinese yuan was about 1 dollar to 8 yuan. My family could never have been able to afford my education if the exchange rate remained that high. However, when the Great Recession hit, the U.S. government enacted the monetary policy of printing more money to save the U.S. economy from another Great Depression. Consequently, the dollar and yuan exchange rate fell to 1 dollar to 6-6.5 yuan. Though the exchange rate had climbed to about 1 dollar to 7 yuan for a short while, the 2018 trade war and 2020 COVID stimulus had both seen the dollar unofficially devaluates compared to the yuan. As a result of this global interdependence, U.S. government policies allowed my family in China to pay about 250,000 yuan less for my education, making it much more affordable.
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